Disney's stock shines even as earnings decline

SAN FRANCISCO—Disney won over more fans on Wall Street with its latest quarterly performance, despite a slight drop in its earnings.

The downturn announced Tuesday was less pronounced than the modest dip analysts anticipated as Walt Disney Co. digested higher programming costs at its ESPN television network and dealt with a less appealing line-up of home video releases in its movie studio. Higher expenses for distributing box-office hits such as "Lincoln" and ""Wreck-It-Ralph" also created a drag during the holiday-season quarter.

The Burbank, Calif. company offset some of those problems with an advertising upturn at its ABC network, higher spending at its theme parks and a reversal of an operating loss in its video games division.

It was good enough to set the stage for Disney's stock to hit a new high in Wednesday's trading. The shares gained $1.48, or 2.7 percent, to $55.77 in Tuesday's extended trading after the release of the financial results. If the stock reaches that level Wednesday, it will top its previous peak of $54.87, which the shares touched just last week.

When Disney does well, it tends to lift spirits throughout the stock market. That's because Disney is one of the 30 companies that comprise the influential Dow Jones industrial average and also is part of the Standard & Poor's 500 index that serves as a basis for many investment funds. Both the Dow Jones and S&P indexes are nearing their all-time highs reached in 2007.

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Although he didn't make a concrete forecast, Disney CEO Robert Iger painted a bright picture for analysts during Tuesday conference call.

"We're confident about the year ahead, as well as our ability to create continued long-term growth," Iger said.

Most analysts have been optimistic about Disney's prospects for several reasons.

Cable and TV satellite providers are expected to pay Disney higher fees to carry its channels on their systems. Disney also is opening new theme parks and adding more attractions such as "Cars Land," which helped bring in more crowds and boost spending at its southern California resort during the latest quarter.

On the movie studio side, Disney plans to release several potential crowd pleasers later this year, including a prequel to "The Wizard of Oz," a sequel to the 2001 animation hit "Monsters Inc." and a new take on "The Lone Ranger" starring Johnny Depp. Meanwhile, sequels are already in the planning stages for three of the most successful film franchises in Hollywood history: "Pirates of the Caribbean," "The Avengers" and "Star Wars." Disney just picked up the rights to the latter franchise in late December when the company completed its $4.06 billion acquisition of Lucasfilm Ltd.

The next installment in the "Star Wars" saga, due out in the summer of 2015, will be directed by acclaimed science-fiction film maker J.J. Abrams. In Tuesday's conference call, Iger also confirmed Lucasfilm will make at least two other films outside the "Star Wars" saga. The first two peripheral projects are being overseen by Lawrence Kasdan, who wrote "The Empire Strikes Back" and "Return of the Jedi," and Simon Kinberg, whose credits include writing "X-Men: The Last Stand."

Looking even further ahead, Disney has lined itself for a big payday from Netflix Inc. by licensing its latest theatrical releases to the Internet video subscription service beginning in 2016. That deal was reached in early December.

Disney earned $1.38 billion, or 77 cents per share, during its fiscal first quarter, a three-month stretch that ended Dec. 29. That compared with net income of $1.46 billion, or 80 cents per share, in the same period in 2011.

Excluding certain charges and one-time gains, Disney said it would have earned 79 cents per share. On that basis, the results exceeded the average estimate of 76 cents per share among analysts surveyed by FactSet.

Revenue climbed 5 percent from the previous year to $11.3 billion—about $130 million above analyst predictions.